Aviation equipment companies mainly inefficient, improving but with a long way to go

Citation

(2000), "Aviation equipment companies mainly inefficient, improving but with a long way to go", Aircraft Engineering and Aerospace Technology, Vol. 72 No. 1. https://doi.org/10.1108/aeat.2000.12772aaf.006

Aviation equipment companies mainly inefficient, improving but with a long way to go

Keywords Aircraft industry, Equipment, Plimsoll, Analysis

Of the 1,197 companies studied in the latest Plimsoll Portfolio Analysis - Aviation Equipment, 22 per cent were grossly inefficient in their use of capital. On average aviation equipment companies for each £1 invested in their businesses only sell £1.63 of (goods) services. This is better than four years ago when the figure was £1.54 per £1 invested.

Despite this improvement Plimsoll located a band of 140 companies, or 22 per cent of the industry that suffered a serious decline in their sales performance relative to their assets and it has fallen to such a low level that their capital return is no longer competitive. These companies are only generating around £1.02 in sales for every £1 spent on investment. If this band of companies were to fully exploit their capital base, they would need to raise sales by 61 per cent.

If you only sell £1.63 per pound invested what chance have you of making a profit? Profits are slim at 10 pence per pound invested, up almost five pence from four years ago. Only 50 per cent of the industry made an acceptable 10 pence or 10 per cent return on their investment.

Again Plimsoll also identified a band of 168 companies, or 22 per cent of the industry that perhaps should be more concerned. They have suffered a serious decline in their profit efficiency to a level where they are now no longer profitable. These companies are squandering their assets because they are losing part of every pound invested. Don Turkington, Managing Director of Plimsoll Publishing Limited, said "These companies have some tough and immediate decisions to make".

Conclusion

Clearly, these factors need constant surveillance. Of the 19 per cent of companies in the aviation equipment industry that suffered a decline in sales over the last four years, 62 per cent of these companies took some steps to reduce their asset base to reflect this reduction in capacity. Unfortunately, though, many of these companies did not "cut" deep enough.

The Plimsoll Portfolio Analysis - Aviation Equipment, Autumn Edition, 1999 looks critically at the performance of 1,197 companies over the last four years. Companies that are improving in the industry are identified, also those that are set to lose their place in the industry unless they can make radical changes.

To order the Plimsoll Portfolio Analysis - Aviation Equipment, Autumn Edition, 1999, contact: Jennifer Ovington. Tel: +44 (0)1642 257800; e-mail: plimsoll@dial.pipex.com Mention this journal when ordering and you will receive a 5 per cent discount on the purchase price.